Edgar Filing: GRANITE CONSTRUCTION INC

GVA 6.30.2013 10Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 30, 2013



o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from ___________ to ___________

	Commission File Number: 1-12911

GRANITE CONSTRUCTION INCORPORATED



State of Incorporation:	I.R.S. Employer Identification Number:
Delaware	77-0239383

Address of principal executive offices:

585 W. Beach Street

Watsonville, California 95076

(831) 724-1011

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. xYes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). xYes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer x	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes x No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of July 22, 2013.



Class		Outstanding
Common Stock, $0.01 par value		38,874,400 shares

Index



PART I. FINANCIAL INFORMATION
	Item 1.	Financial Statements (unaudited)
		Condensed Consolidated Balance Sheets as of June 30, 2013, December 31, 2012 and June 30, 2012
		Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2013 and 2012
		Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2013 and 2012
		Notes to the Condensed Consolidated Financial Statements
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk
	Item 4.	Controls and Procedures
PART II. OTHER INFORMATION
	Item 1.	Legal Proceedings
	Item 1A.	Risk Factors
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds
	Item 3.	Defaults Upon Senior Securities
	Item 4.	Mine Safety Disclosures
	Item 5.	Other Information
	Item 6.	Exhibits
SIGNATURES
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32
EXHIBIT 95
EXHIBIT 101.INS
EXHIBIT 101.SCH
EXHIBIT 101.CAL
EXHIBIT 101.DEF
EXHIBIT 101.LAB
EXHIBIT 101.PRE

Table of Contents

PART I. FINANCIAL INFORMATION


Item 1.	FINANCIAL STATEMENTS



GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited - in thousands, except share and per share data)
	June 30, 2013		December 31, 2012		June 30, 2012
ASSETS
Current assets
Cash and cash equivalents ($63,806, $105,865 and $67,685 related to consolidated construction joint ventures (“CCJVs”))	$	247,833	$	321,990	$	237,951
Short-term marketable securities	21,271		56,088		43,260
Receivables, net ($59,807, $43,902 and $26,903 related to CCJVs)	336,418		325,529		272,562
Costs and estimated earnings in excess of billings	63,341		34,116		69,688
Inventories	68,905		59,785		67,503
Real estate held for development and sale	50,697		50,223		57,367
Deferred income taxes	36,687		36,687		38,571
Equity in construction joint ventures	148,727		105,805		107,821
Other current assets	35,651		31,834		20,436
Total current assets	1,009,530		1,022,057		915,159
Property and equipment, net ($34,891, $41,114 and $6,919 related to CCJVs)	471,265		481,478		439,664
Long-term marketable securities	55,225		55,342		45,800
Investments in affiliates	31,421		30,799		28,521
Goodwill	53,598		55,419		9,900
Other noncurrent assets	80,365		84,392		68,603
Total assets	$	1,701,404	$	1,729,487	$	1,507,647

LIABILITIES AND EQUITY
Current liabilities
Current maturities of long-term debt	$	20	$	8,353	$	9,102
Current maturities of non-recourse debt	2,147		10,707		16,328
Accounts payable ($18,297, $34,536 and $31,135 related to CCJVs)	188,124		202,541		186,290
Billings in excess of costs and estimated earnings ($72,094, $72,490 and $17,979 related to CCJVs)	144,044		139,692		75,629
Accrued expenses and other current liabilities ($9,153, $8,312 and $3,027 related to CCJVs)	200,521		169,979		155,322
Total current liabilities	534,856		531,272		442,671
Long-term debt	270,148		270,148		200,168
Long-term non-recourse debt	7,354		922		4,641
Other long-term liabilities	46,817		47,124		47,393
Deferred income taxes	8,055		8,163		3,644
Commitments and contingencies
Equity
Preferred stock, $0.01 par value, authorized 3,000,000 shares, none outstanding	—		—		—
Common stock, $0.01 par value, authorized 150,000,000 shares; issued and outstanding 38,852,463 shares as of June 30, 2013, 38,730,665 shares as of December 31, 2012 and 38,684,540 shares as of June 30, 2012	389		387		387
Additional paid-in capital	121,368		117,422		112,815
Retained earnings	682,610		712,144		667,278
Total Granite Construction Incorporated shareholders’ equity	804,367		829,953		780,480
Noncontrolling interests	29,807		41,905		28,650
Total equity	834,174		871,858		809,130
Total liabilities and equity	$	1,701,404	$	1,729,487	$	1,507,647

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents



GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - in thousands, except per share data)
	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Revenue
Construction	$	308,602		$	245,113		$	485,720		$	363,059
Large Project Construction	181,371			228,799			353,086			392,727
Construction Materials	60,185			63,349			89,935			88,972
Real Estate	4			2,354			125			5,017
Total revenue	550,162			539,615			928,866			849,775
Cost of revenue
Construction	283,448			227,152			447,367			336,518
Large Project Construction	159,283			200,560			308,278			342,239
Construction Materials	56,231			58,349			91,955			89,922
Real Estate	3			1,638			13			4,244
Total cost of revenue	498,965			487,699			847,613			772,923
Gross profit	51,197			51,916			81,253			76,852
Selling, general and administrative expenses	46,454			40,806			104,112			85,882
Gain on restructuring	—			—			497			1,888
Gain on sales of property and equipment	3,306			2,954			4,394			4,871
Operating income (loss)	8,049			14,064			(17,968		)	(2,271		)
Other income (expense)
Interest income	380			611			508			1,655
Interest expense	(3,700		)	(2,827		)	(7,345		)	(6,009		)
Equity in income (loss) of affiliates	698			(484		)	275			(1,101		)
Other (expense) income, net	(495		)	(5,018		)	608			1,853
Total other expense	(3,117		)	(7,718		)	(5,954		)	(3,602		)
Income (loss) before provision for (benefit from) income taxes	4,932			6,346			(23,922		)	(5,873		)
Provision for (benefit from) income taxes	1,766			1,859			(7,261		)	(1,673		)
Net income (loss)	3,166			4,487			(16,661		)	(4,200		)
Amount attributable to noncontrolling interests	(448		)	(2,538		)	(2,603		)	(5,624		)
Net income (loss) attributable to Granite Construction Incorporated	$	2,718		$	1,949		$	(19,264	)	$	(9,824	)

Net income (loss) per share attributable to common shareholders (see Notes 12 and 13)
Basic	$	0.07		$	0.05		$	(0.50	)	$	(0.26	)
Diluted	$	0.07		$	0.05		$	(0.50	)	$	(0.26	)
Weighted average shares of common stock
Basic	38,829			38,471			38,720			38,368
Diluted	39,769			39,151			38,720			38,368
Dividends per common share	$	0.13		$	0.13		$	0.26		$	0.26

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents



GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - in thousands)
Six Months Ended June 30,	2013			2012
Operating activities
Net loss	$	(16,661	)	$	(4,200	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, depletion and amortization	33,988			29,573
Non-cash restructuring, net	(497		)	(1,888		)
Other non-cash impairment charges	—			2,752
Gain on sales of property and equipment	(4,394		)	(4,871		)
Stock-based compensation	8,101			6,492
Changes in assets and liabilities, net of the effects of acquisition:
Receivables	(9,176		)	(20,771		)
Costs and estimated earnings in excess of billings, net	(24,873		)	(47,201		)
Inventories	(9,120		)	(16,528		)
Equity in construction joint ventures, including performance guarantees	(42,336		)	(6,792		)
Other assets, net	(5,957		)	15,753
Accounts payable	(10,548		)	27,632
Accrued expenses and other current liabilities, net, including performance guarantees	29,825			(14,575		)
Net cash used in operating activities	(51,648		)	(34,624		)
Investing activities
Purchases of marketable securities	(14,975		)	(39,945		)
Maturities of marketable securities	43,000			65,100
Proceeds from sale of marketable securities	5,000			35,000
Additions to property and equipment	(19,422		)	(19,855		)
Proceeds from sales of property and equipment	8,481			6,078
Payment of Kenny post-closing adjustments	(4,621		)	—
Other investing activities, net	163			(978		)
Net cash provided by investing activities	17,626			45,400
Financing activities
Long-term debt principal payments	(10,594		)	(10,834		)
Cash dividends paid	(10,078		)	(10,050		)
Purchases of common stock	(5,022		)	(4,054		)
Contributions from noncontrolling partners	6,001			—
Distributions to noncontrolling partners	(21,142		)	(5,440		)
Other financing activities, net	700			563
Net cash used in financing activities	(40,135		)	(29,815		)
Decrease in cash and cash equivalents	(74,157		)	(19,039		)
Cash and cash equivalents at beginning of period	321,990			256,990
Cash and cash equivalents at end of period	$	247,833		$	237,951



Supplementary Information
Cash paid during the period for:
Interest	$	7,339	$	7,158
Income taxes	2,006		771
Non-cash investing and financing activities:
Restricted stock units issued, net of forfeitures	$	14,862	$	11,417
Accrued cash dividends	5,051		5,029
Debt payments out of escrow from sale of assets	—		1,109
Debt extinguishment from joint venture interest transfer	—		9,115
Debt payment from refinancing	—		1,150

The accompanying notes are an integral part of these condensed consolidated financial statements.

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GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


1.	Basis of Presentation

The condensed consolidated financial statements included herein have been prepared by Granite Construction Incorporated (“we,” “us,” “our,” “Company” or “Granite”) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2012. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted, although we believe the disclosures which are made are adequate to make the information presented not misleading. Further, the condensed consolidated financial statements reflect, in the opinion of management, all normal recurring adjustments necessary to state fairly our financial position at June 30, 2013 and 2012 and the results of our operations and cash flows for the periods presented. The December 31, 2012 condensed consolidated balance sheet data was derived from audited consolidated financial statements, but does not include all disclosures required by U.S. GAAP.

We prepared the accompanying condensed consolidated financial statements on the same basis as our annual consolidated financial statements except for the adoption of the following new accounting standards in the first quarter of 2013:

•

In December 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities and in January 2013, issued ASU No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. These ASUs require companies to disclose both gross and net information about financial instruments that have been offset on the balance sheet. These ASUs became effective for our quarter ended March 31, 2013 and did not impact our condensed consolidated financial statements.

•

In July 2012, the FASB issued ASU No. 2012-02, Intangibles - Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment. This ASU gives companies the option to first assess qualitative factors to determine whether it is more likely than not that the indefinite-lived intangible asset is impaired. If it is determined that it is more likely than not the indefinite-lived intangible asset is impaired, a quantitative impairment test is required. However, if it is concluded otherwise, the quantitative test is not necessary. This ASU became effective for our quarter ended March 31, 2013. No impairment analysis was necessary in relation to our indefinite lived intangible assets during the six months ended June 30, 2013; therefore, the adoption of this ASU had no impact to our condensed consolidated financial statements.

•

In February 2013, the FASB issued ASU No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. This ASU requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income in certain circumstances. This ASU was effective commencing with our quarter ended March 31, 2013. For all periods presented comprehensive loss was equal to net loss; therefore, the adoption of this ASU did not have an impact on our condensed consolidated financial statements.

Our operations are typically affected by weather conditions during the first and fourth quarters of our fiscal year which may alter our construction schedules and can create variability in our revenues and profitability. Therefore, the results of operations for the three and six months ended June 30, 2013 are not necessarily indicative of the results to be expected for the full year.

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GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


2.	Revisions in Estimates

Our profit recognition related to construction contracts is based on estimates of costs to complete each project. These estimates can vary in the normal course of business as projects progress and uncertainties are resolved. We do not recognize revenue on contract change orders or claims until we have a signed agreement; however, we do recognize costs as incurred and revisions to estimated total costs as soon as the obligation to perform is determined. Approved change orders and claims, as well as changes in related estimates of costs to complete, are considered revisions in estimates. We use the cumulative catch-up method applicable to construction contract accounting to account for revisions in estimates. Under this method, revisions in estimates are accounted for in their entirety in the period of change. As of June 30, 2013, we had no revisions in estimates that are reasonably certain to impact future periods.

Construction

Increases



	Three Months Ended June 30,						Six Months Ended June 30,
(dollars in millions)			2013		2012		2013		2012
Number of projects with upward estimate changes			1		1		2		3
Range of increase in gross profit from each project, net		$	1.6	$	1.4	$	1.4 - 1.7	$	1.1 - 3.2
Increase to project profitability		$	1.6	$	1.4	$	3.1	$	5.4

The increases during the three and six months ended June 30, 2013 were due to owner directed scope changes. The increases during the three and six months ended June 30, 2012 were due to production at a higher rate than anticipated and settlement of outstanding issues with contract owners.

Decreases



	Three Months Ended June 30,						Six Months Ended June 30,
(dollars in millions)			2013		2012		2013		2012
Number of projects with downward estimate changes			1		2		2		2
Range of reduction in gross profit from each project, net		$	2.1	$	1.1 - 1.9	$	1.0 - 2.4	$	1.4 - 4.8
Decrease to project profitability		$	2.1	$	3.0	$	3.4	$	6.2

The decreases during the three and six months ended June 30, 2013 and 2012 were due to lower productivity than originally anticipated.

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GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Large Project Construction

The net changes in project profitability from revisions in estimates, both increases and decreases, that individually had an impact of $1.0 million or more on gross profit were net increases of $8.7 million and $17.9 million for the three and six months ended June 30, 2013, respectively. The net changes for the three and six months ended June 30, 2012 were net increases of $9.3 million and $13.7 million, respectively. Amounts attributable to noncontrolling interests were $0.4 million and $1.4 million of the net increases for the three and six months ended June 30, 2013 and were $0.4 million and $0.9 million of the net increases for the three and six months ended June 30, 2012, respectively. The projects are summarized as follows:

Increases



	Three Months Ended June 30,						Six Months Ended June 30,
(dollars in millions)			2013		2012		2013		2012
Number of projects with upward estimate changes			5		6		5		6
Range of increase in gross profit from each project, net		$	1.3 - 8.3	$	1.2 - 3.6	$	1.5 - 16.1	$	1.4 - 5.2
Increase to project profitability		$	15.8	$	14.9	$	31.9	$	23.1

The increases during the three and six months ended June 30, 2013 were due to production at a higher rate than anticipated, resolution of project uncertainties and owner directed scope changes. The increases during the three and six months ended June 30, 2012 were due to owner directed scope changes and production at a higher rate than anticipated.

Decreases



	Three Months Ended June 30,						Six Months Ended June 30,
(dollars in millions)			2013		2012		2013		2012
Number of projects with downward estimate changes			2		1		2		2
Range of reduction in gross profit from each project, net		$	2.8 - 4.3	$	5.6	$	5.2 - 8.8	$	1.5 - 7.9
Decrease to project profitability		$	7.1	$	5.6	$	14.0	$	9.4

The downward estimate changes during the three and six months ended June 30, 2013 and 2012 were due to lower productivity than anticipated.

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GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


3.	Marketable Securities

All marketable securities were classified as held-to-maturity for the dates presented and the carrying amounts of held-to-maturity securities were as follows:



(in thousands)	June 30, 2013		December 31, 2012		June 30, 2012
U.S. Government and agency obligations	$	613	$	7,375	$	20,107
Commercial paper	14,992		34,966		14,967
Municipal bonds	5,666		8,738		3,065
Corporate bonds	—		5,009		5,121
Total short-term marketable securities	21,271		56,088		43,260
U.S. Government and agency obligations	55,225		55,342		40,041
Municipal bonds	—		—		5,759
Total long-term marketable securities	55,225		55,342		45,800
Total marketable securities	$	76,496	$	111,430	$	89,060

Scheduled maturities of held-to-maturity investments were as follows (in thousands):



June 30, 2013
Due within one year	$	21,271
Due in one to five years	55,225
Total	$	76,496

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GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


4.	Fair Value Measurement

Fair value accounting standards describe three levels that may be used to measure fair value:


•	Level 1 - Quoted prices in active markets for identical assets or liabilities.


•	Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.


•	Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The following tables summarize assets and liabilities measured at fair value in the condensed consolidated balance sheets on a recurring basis for each of the fair value levels:



June 30, 2013	Fair Value Measurement at Reporting Date Using
(in thousands)	Level 1		Level 2		Level 3		Total
Cash equivalents
Money market funds	$	144,605	$	—	$	—	$	144,605
Total assets	$	144,605	$	—	$	—	$	144,605



December 31, 2012	Fair Value Measurement at Reporting Date Using
(in thousands)	Level 1		Level 2		Level 3		Total
Cash equivalents
Money market funds	$	201,542	$	—	$	—	$	201,542
Held-to-maturity commercial paper	5,000		—		—		5,000
Total assets	$	206,542	$	—	$	—	$	206,542



June 30, 2012	Fair Value Measurement at Reporting Date Using
(in thousands)	Level 1		Level 2		Level 3		Total
Cash equivalents
Money market funds	$	167,427	$	—	$	—	$	167,427
Held-to-maturity commercial paper	4,997		—		—		4,997
Total assets	$	172,424	$	—	$	—	$	172,424

A reconciliation of cash equivalents to consolidated cash and cash equivalents is as follows:



(in thousands)	June 30, 2013		December 31, 2012		June 30, 2012
Cash equivalents	$	144,605	$	206,542	$	172,424
Cash	103,228		115,448		65,527
Total cash and cash equivalents	$	247,833	$	321,990	$	237,951

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GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The carrying values and estimated fair values of our financial instruments that are not required to be measured at fair value in the condensed consolidated balance sheets are as follows:



		June 30, 2013				December 31, 2012				June 30, 2012
(in thousands)	Fair Value Hierarchy	Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value
Assets:
Held-to-maturity marketable securities¹	Level 1	$	76,496	$	76,100	$	111,430	$	111,525	$	89,060	$	89,239
Liabilities (including current maturities):
Senior notes payable²	Level 3	$	200,000	$	227,902	$	208,333	$	243,118	$	208,333	$	239,443
Credit Agreement loan²	Level 3	70,000		69,321		70,000		70,444		—		—

¹Held-to-maturity marketable securities are periodically assessed for other-than-temporary impairment.

²The fair values of the senior notes payable and Credit Agreement loan are based on borrowing rates available to us for long-term loans with similar terms, average maturities, and credit risk.

The carrying values of receivables, other current assets, and accrued expenses and other current liabilities approximate their fair values due to the short-term nature of these instruments. In addition, the fair value of non-recourse debt measured using Level 3 inputs approximates its carrying value due to its relative short-term nature and competitive interest rates. During the three and six months ended June 30, 2013 and 2012, we did not record any significant fair value adjustments related to nonfinancial assets and liabilities measured at fair value on a nonrecurring basis.


5.	Receivables, net



(in thousands)	June 30, 2013		December 31, 2012		June 30, 2012
Construction contracts:
Completed and in progress	$	207,488	$	195,244	$	146,509
Retentions	76,288		93,800		66,265
Total construction contracts	283,776		289,044		212,774
Construction material sales	43,535		26,918		50,205
Other	11,700		12,316		12,624
Total gross receivables	339,011		328,278		275,603
Less: allowance for doubtful accounts	2,593		2,749		3,041
Total net receivables	$	336,418	$	325,529	$	272,562

Receivables include amounts billed and billable to clients for services provided and/or according to contract terms as of the end of the applicable period and do not bear interest. Certain contracts include provisions that permit us to submit invoices in advance of providing services and, to the extent not collected, they are included in receivables. Other contracts include provisions that permit us to submit invoices based on the passage of time, achievement of milestones or completion of the project. To the extent the related costs have not been billed, the contract balance is included in costs and estimated earnings in excess of billings on the condensed consolidated balance sheets.

Certain construction contracts include retainage provisions. The balances billed but not paid by customers pursuant to these provisions in general become due upon completion and acceptance of the contract by the owners. As of June 30, 2013, substantially all of the retentions receivable are expected to be collected within one year. Included in other receivables at June 30, 2013, December 31, 2012 and June 30, 2012 were items such as notes receivable, fuel tax refunds and income tax refunds. No such receivables individually exceeded 10% of total net receivables at any of these dates.

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GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Financing receivables consisted of long-term notes receivable and retentions receivable. As of June 30, 2013, December 31, 2012 and June 30, 2012 long-term notes receivable outstanding were $1.6 million, $2.0 million and $1.9 million, respectively, and primarily related to loans made to employees and were included in other noncurrent assets in our condensed consolidated balance sheets.

We segregate our retention receivables into two categories: escrow and non-escrow. The balances in each category were as follows:



(in thousands)	June 30, 2013		December 31, 2012		June 30, 2012
Escrow	$	31,892	$	41,494	$	42,421
Non-escrow	44,396		52,306		23,844
Total retention receivables	$	76,288	$	93,800	$	66,265

The escrow receivables include amounts due to Granite which have been deposited into an escrow account and bear interest. Typically, escrow retention receivables are held until work on a project is complete and has been accepted by the owner who then releases those funds, along with accrued interest, to us. There is minimal risk of not collecting on these amounts.

Non-escrow retention receivables are amounts that the project owner has contractually withheld that are to be paid upon owner acceptance of contract completion. We evaluate our non-escrow retention receivables for collectability using certain customer information that includes the following:


•	Federal - includes federal agencies such as the Bureau of Reclamation, the Army Corp of Engineers, and the Bureau of Indian Affairs. The obligations of these agencies are backed by the federal government. Consequently, there is minimal risk of not collecting the amounts we are entitled to receive.


•	State - primarily state departments of transportation. The risk of not collecting on these accounts is low; however, we have experienced occasional delays in payment as states have struggled with budget issues.


•	Local - these customers include local agencies such as cities, counties and other local municipal agencies. The risk of not collecting on these accounts is low; however, we have experienced occasional delays in payment as some local agencies have struggled to deal with budget issues.

•

Private - includes individuals, developers and corporations. The majority of our collection risk is associated with these customers. We perform ongoing credit evaluations of our customers and generally do not require collateral, although the law provides us certain remedies, including, but not limited to, the ability to file mechanics’ liens on real property improved for private customers in the event of non-payment by such customers.

The following table summarizes the amount of our non-escrow retention receivables within each category:



(in thousands)	June 30, 2013		December 31, 2012		June 30, 2012
Federal	$	3,325	$	3,234	$	2,464
State	2,757		2,971		4,626
Local	32,500		31,559		9,944
Private	5,814		14,542		6,810
Total	$	44,396	$	52,306	$	23,844

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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We regularly review our accounts receivable, including past due amounts, to determine their probability of collection. If it is probable that an amount is uncollectible, it is charged to bad debt expense and a corresponding reserve is established in allowance for doubtful accounts. If it is deemed certain that an amount is uncollectible, the amount is written off. Based on contract terms, non-escrow retention receivables are typically due within 60 days of owner acceptance of contract completion. We consider retention amounts beyond 60 days of owner acceptance of contract completion to be past due. The following tables present the aging of our non-escrow retention receivables (in thousands):



June 30, 2013	Current		1 - 90 Days Past Due		Over 90 Days Past Due		Total
Federal	$	2,551	$	236	$	538	$	3,325
State	1,327		619		811		2,757
Local	25,362		1,496		5,642		32,500
Private	4,571		634		609		5,814
Total	$	33,811	$	2,985	$	7,600	$	44,396



December 31, 2012	Current		1 - 90 Days Past Due		Over 90 Days Past Due		Total
Federal	$	3,116	$	72	$	46	$	3,234
State	2,148		502		321		2,971
Local	25,743		1,082		4,734		31,559
Private	13,310		716		516		14,542
Total	$	44,317	$	2,372	$	5,617	$	52,306



June 30, 2012	Current		1 - 90 Days Past Due		Over 90 Days Past Due		Total
Federal	$	1,746	$	—	$	718	$	2,464
State	3,552		208		866		4,626
Local	7,330		1,326		1,288		9,944
Private	6,363		92		355		6,810
Total	$	18,991	$	1,626	$	3,227	$	23,844

Federal, state and local agencies generally require several approvals to release payments, and these approvals often take over 90 days past contractual due dates to obtain. Amounts past due from government agencies primarily result from delays caused by paperwork processing and obtaining proper agency approvals rather than lack of funds. We generally receive payment within one year of owner acceptance. As of June 30, 2013, December 31, 2012 and June 30, 2012, our allowance for doubtful accounts contained no material provision related to non-escrow retention receivables as we determined there were no significant collectibility issues.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


6.	Construction and Line Item Joint Ventures

We participate in various construction joint venture partnerships and two limited liability company. We also participate in various “line item” joint venture agreements under which each partner is responsible for performing certain discrete items of the total scope of contracted work.

Our agreements with our joint venture partners for both construction joint ventures and line item joint ventures provide that each party will pay for any losses it is responsible for under the joint venture agreement. Circumstances that could lead to a loss under our joint venture arrangements beyond our stated ownership interest include the failure of a partner to contribute additional funds to the venture in the event the project incurs a loss or additional costs that we could incur should a partner fail to provide the services and resources that it had committed to provide in the joint venture agreement. Due to the joint and several nature of the obligations under our joint venture arrangements, if one of our joint venture partners fails to perform, we and the remaining joint venture partners would be responsible for performance of the outstanding work.

At June 30, 2013, there was approximately $5.1 billion of construction revenue to be recognized on unconsolidated and line item construction joint venture contracts of which $1.4 billion represented our share and the remaining $3.7 billion represented our partners’ share. We are not able to estimate amounts that may be required beyond the remaining cost of the work to be performed. These costs could be offset by billings to the customer or by proceeds from our partners’ corporate and/or other guarantees.

Construction Joint Ventures

Generally, each construction joint venture is formed to complete a specific contract and is jointly controlled by the joint venture partners. The joint venture agreements typically provide that our interests in any profits and assets, and our respective share in any losses and liabilities resulting from the performance of the contracts, are limited to our stated percentage interest in the project. We have no significant commitments beyond completion of the contracts. Under our contractual arrangements, we provide capital to these joint ventures in return for an ownership interest. In addition, partners dedicate resources to the ventures necessary to complete the contracts and are reimbursed for their cost. The operational risks of each construction joint venture are passed along to the joint venture partners. As we absorb our share of these risks, our investment in each venture is exposed to potential losses.

We have determined that certain of these joint ventures are consolidated because they are variable interest entities (“VIEs”) and we are the primary beneficiary, or because they are not VIEs and we hold the majority voting interest. The factors we consider in determining whether we are a VIE’s primary beneficiary include the decision authority of each partner, which partner manages the day-to-day operations of the project and the amount of our equity investment in relation to that of our partners. Based on our initial primary beneficiary analysis for one construction joint venture, we determined that decision making responsibility is shared between the venture partners. Therefore, this joint venture did not have an identifiable primary beneficiary partner and we continue to report the pro rata results. All other joint ventures were assigned one primary beneficiary partner.

We continually evaluate whether there are changes in the status of the VIE’s or changes to the primary beneficiary designation of the VIE. Based on our assessments during the six months ended June 30, 2013 and 2012, we determined no change was required to the accounting for existing construction joint ventures.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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Consolidated Construction Joint Ventures

The carrying amounts and classification of assets and liabilities of construction joint ventures we are required to consolidate are included in our condensed consolidated financial statements as follows:



(in thousands)	June 30, 2013		December 31, 2012		June 30, 2012
Cash and cash equivalents¹	$	63,806	$	105,865	$	67,685
Receivables, net	59,807		43,902		26,903
Other current assets	3,592		4,008		2,125
Total current assets	127,205		153,775		96,713
Property and equipment, net	34,891		41,114		6,919
Other noncurrent assets	1,253		1,700		—
Total assets²	$	163,349	$	196,589	$	103,632

Accounts payable	$	18,297	$	34,536	$	31,135
Billings in excess of costs and estimated earnings¹	72,094		72,490		17,979
Accrued expenses and other current liabilities	9,153		8,312		3,027
Total liabilities²	$	99,544	$	115,338	$	52,141

¹The volume and stage of completion of contracts from our consolidated construction joint ventures may cause fluctuations in cash and cash equivalents, as well as billings in excess of costs and estimated earnings between periods.

²The assets and liabilities of each joint venture relate solely to that joint venture. The decision to distribute joint venture cash and cash equivalents and assets must generally be made jointly by all of the partners and, accordingly, these cash and cash equivalents and assets generally are not available for the working capital needs of Granite until distributed.

At June 30, 2013, we were engaged in four active consolidated construction joint venture projects with total contract values ranging from $0.4 million to $336.9 million. The total revenue remaining to be recognized on these consolidated joint ventures ranged from $0.4 million to $120.5 million. Our proportionate share of the equity in these joint ventures was between 51.0% and 65.0%. During the three and six months ended June 30, 2013, total revenue from consolidated construction joint ventures was $45.5 million and $88.7 million, respectively. During the three and six months ended June 30, 2012, total revenue from consolidated construction joint ventures was $55.0 million and $96.6 million, respectively. Total cash used in consolidated construction joint venture operations was $16.3 million and $1.9 million during the six months ended June 30, 2013 and 2012, respectively.

Unconsolidated Construction Joint Ventures

We account for our share of construction joint ventures that we are not required to consolidate on a pro rata basis in the condensed consolidated statements of operations and as a single line item on the condensed consolidated balance sheets. As of June 30, 2013, these unconsolidated joint ventures were engaged in twelve active construction projects with total contract values ranging from $40.3 million to $3.1 billion. Our proportionate share of the equity in these unconsolidated joint ventures ranged from 20.0% to 50.0%. As of June 30, 2013, our share of the revenue remaining to be recognized on these unconsolidated joint ventures ranged from $0.3 million to $722.9 million.

As of June 30, 2013, one of our unconsolidated construction joint ventures was located in Canada and, therefore, the associated disclosures throughout this footnote include amounts that were translated from Canadian dollars to U.S. dollars using the spot rate in effect as of the reporting date for balance sheet items, or the average rate in effect during the reporting period for results of operations. The associated foreign currency translation adjustments did not have a material impact on the financial statements for any of the periods presented.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Following is summary financial information related to unconsolidated construction joint ventures:



(in thousands)	June 30, 2013		December 31, 2012		June 30, 2012
Assets:
Cash and cash equivalents¹	$	342,534	$	244,686	$	337,102
Other assets	439,812		301,412		300,744
Less partners’ interest	512,775		342,545		392,139
Granite’s interest	269,571		203,553		245,707
Liabilities:
Accounts payable	115,606		114,039		101,782
Billings in excess of costs and estimated earnings¹	262,259		161,268		265,883
Other liabilities	25,733		6,106		8,455
Less partners’ interest	282,521		183,432		238,234
Granite’s interest	121,077		97,981		137,886
Equity in construction joint ventures²	$	148,494	$	105,572	$	107,821

¹The volume and stage of completion of contracts from our unconsolidated construction joint ventures may cause fluctuations in cash and cash equivalents, as well as billings in excess of costs and estimated earnings between periods. The decision to distribute joint venture cash and cash equivalents and assets must generally be made jointly by all of the partners and, accordingly, these cash and cash equivalents and assets generally are not available for the working capital needs of Granite until distributed.

²As of June 30, 2013 and December 31, 2012, this balance included $0.2 million of deficit in unconsolidated construction joint ventures that is included in accrued expenses and other current liabilities on the condensed consolidated balance sheets.



	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2013		2012		2013		2012
Revenue:
Total¹	$	259,255	$	284,095	$	484,558	$	489,926
Less partners’ interest^1,2	172,656		183,861		326,361		316,064
Granite’s interest	86,599		100,234		158,197		173,862
Cost of revenue:
Total¹	212,779		227,389		371,475		397,001
Less partners’ interest^1,2	141,659		150,091		248,980		259,331
Granite’s interest	71,120		77,298		122,495		137,670
Granite’s interest in gross profit	$	15,479	$	22,936	$	35,702	$	36,192

¹While Granite’s interest in revenue, cost of revenue and gross profit were correctly stated, total and partners’ interest for revenue and cost of revenue for the three and six month periods ended June 30, 2012 were inadvertently misstated in our Quarterly Report for the quarter ended June 30, 2012. Total revenue, partner’s interest in revenue, total cost of revenue and partners’ interest in cost of revenue reported were (in thousands): $663,536, $563,302, $544,838 and $467,540, respectively, for the three months ended June 30, 2012, and $869,368, $695,505, $714,450 and $576,780, respectively, for the six months ended June 30, 2012.

²Partners’ interest represents amounts to reconcile total revenue and total cost of revenue as reported by our partners to Granite’s interest, adjusted to reflect our accounting policies.

Line Item Joint Ventures

The revenue for each line item joint venture partner’s discrete items of work is defined in the contract with the project owner and each venture partner bears the profitability risk associated with its own work. There is not a single set of books and records for a line item joint venture. Each partner accounts for its items of work individually as it would for any self-performed contract. We include only our portion of these contracts in our condensed consolidated financial statements. As of June 30, 2013, we had five active line item joint venture construction projects with total contract values ranging from $42.2 million to $138.2 million of which our portion ranged from $25.1 million to $59.5 million. As of June 30, 2013, our share of revenue remaining to be recognized on these line item joint ventures ranged from $0.3 million to $23.8 million.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


7.	Real Estate Entities and Investments in Affiliates

The operations of our Real Estate segment are conducted through our wholly owned subsidiary, Granite Land Company (“GLC”). Generally, GLC participates with third-party partners in entities that are formed to accomplish specific real estate development projects. Our real estate affiliates include limited partnerships or limited liability companies of which we are a limited partner or member. The agreements with GLC’s partners in these real estate entities define each partner’s management role and financial responsibility in the project. If one of GLC’s partners is unable to fulfill its management role or make its required financial contribution, GLC may assume full management or financial responsibility for the project. This may result in the future consolidation of entities that are currently accounted for under the equity method in our condensed consolidated financial statements. The amount of GLC’s exposure is limited to GLC’s equity investment in the real estate joint venture. Our proportionate share of the profits and losses of these entities depends on the ultimate operating results of the entities.

Substantially all the assets of these real estate entities in which we are participants through our GLC subsidiary are classified as real estate held for development and sale and are pledged as collateral for the associated debt. All outstanding debt of these entities is non-recourse to Granite. However, there is recourse to our real estate affiliates that incurred the debt (i.e., the limited partnership or limited liability company of which we are a limited partner or member).

GLC receives authorization to provide additional financial support for certain of its real estate entities in increments to address changes in business plans. During the six months ended June 30, 2013, GLC was authorized to increase its financial support to one consolidated real estate entity by $5.9 million to meet existing debt obligations, and during the six months ended June 30, 2012 there was no increase to its authorized financial support. As of June 30, 2013, $3.4 million of the total authorized investment had yet to be contributed to the consolidated entity.

We have determined that certain of these joint ventures are consolidated because they are VIEs and we are the primary beneficiary. The factors we consider in determining whether we are a VIE’s primary beneficiary include the decision authority of each partner, which partner manages the day-to-day operations of the project and the amount of our equity investment in relation to that of our partners.

To determine if impairment charges should be recognized, the carrying amount of each consolidated real estate development project is reviewed on a quarterly basis. Based on our quarterly evaluations of each project’s business plan, we recorded no material impairment charges to our real estate development projects or investments during the three and six months ended June 30, 2013 and 2012.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Consolidated Real Estate Entities

As of June 30, 2013, December 31, 2012 and June 30, 2012, real estate held for development and sale associated with consolidated real estate entities included in our condensed consolidated balance sheets was $50.7 million, $50.2 million and $57.4 million, respectively. Non-recourse debt, including current maturities, associated with these entities was $9.5 million, $11.6 million and $21.0 million as of June 30, 2013, December 31, 2012 and June 30, 2012, respectively. All other amounts associated with these entities were insignificant for the periods presented. As of June 30, 2013, December 31, 2012 and June 30, 2012, $40.7 million, $40.3 million and $47.5 million, respectively, of the real estate held for development and sale balances were in Washington residential real estate. The remaining balances were primarily in various commercial projects in Texas and California.

Investments in Affiliates

Our investments in affiliates balance consists of the following:



(in thousands)	June 30, 2013		December 31, 2012		June 30, 2012
Equity method investments in real estate affiliates	$	20,378	$	19,775	$	17,563
Equity method investments in other affiliates	11,043		11,024		10,958
Total investments in affiliates	$	31,421	$	30,799	$	28,521

We have determined that certain real estate joint ventures are not consolidated because they are VIEs and we are not the primary beneficiary. We have determined that certain non-real estate joint ventures are not consolidated because they are not VIEs and we do not hold the majority voting interest. As such, these entities were accounted for using the equity method. We account for our share of the operating results of these equity method investments in other income in the condensed consolidated statements of operations and as a single line item on our condensed consolidated balance sheets as investments in affiliates.

The equity method investments in real estate included $14.1 million, $13.8 million and $12.2 million in residential real estate in Texas as of June 30, 2013, December 31, 2012 and June 30, 2012, respectively. The remaining balances were in commercial real estate in Texas. As of June 30, 2013, these real estate entities had total assets ranging from approximately $1.9 million to $47.2 million. As of each of the periods presented, the most significant non-real estate equity method investment was a 50% interest in a limited liability company which owns and operates an asphalt terminal and operates an emulsion plant in Nevada.

The following table provides summarized balance sheet information for our affiliates accounted for under the equity method on a combined basis:



(in thousands)	June 30, 2013		December 31, 2012		June 30, 2012
Total assets	$	160,422	$	166,112	$	158,431
Net assets	93,771		92,106		87,197
Granite’s share of net assets	31,421		30,799		28,521

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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8.	Property and Equipment, net

Balances of major classes of assets and allowances for depreciation and depletion are included in property and equipment, net on our condensed consolidated balance sheets as follows:



(in thousands)	June 30, 2013		December 31, 2012		June 30, 2012
Equipment and vehicles	$	760,271	$	758,782	$	722,724
Quarry property	180,325		180,567		177,792
Land and land improvements	125,489		125,961		126,396
Buildings and leasehold improvements	83,733		83,245		80,910
Office furniture and equipment	68,822		67,743		63,414
Property and equipment	1,218,640		1,216,298		1,171,236
Less: accumulated depreciation and depletion	747,375		734,820		731,572
Property and equipment, net	$	471,265	$	481,478	$	439,664


9.	Intangible Assets

Indefinite-lived Intangible Assets:

Indefinite-lived intangible assets primarily consist of goodwill and use rights. Use rights of $0.4 million are included in other noncurrent assets on our condensed consolidated balance sheets as of June 30, 2013, December 31, 2012 and June 30, 2012.

The following table presents the goodwill balance by reporting segment:



(in thousands)	June 30, 2013		December 31, 2012		June 30, 2012
Construction	$	28,300	$	29,190	$	6,936
Large Project Construction	23,184		24,115		850
Construction Materials	2,114		2,114		2,114
Total goodwill	$	53,598	$	55,419	$	9,900

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Amortized Intangible Assets:

Following is the breakdown of our amortized intangible assets that are included in other noncurrent assets on our condensed consolidated balance sheets:



June 30, 2013			Accumulated
(in thousands)	Gross Value		Amortization			Net Book Value
Permits	$	29,713	$	(11,430	)	$	18,283
Customer lists	4,398		(2,344		)	2,054
Covenants not to compete	1,588		(1,550		)	38
Acquired backlog	7,900		(3,447		)	4,453
Trade name	4,100		(216		)	3,884
Other	871		(797		)	74
Total amortized intangible assets	$	48,570	$	(19,784	)	$	28,786



December 31, 2012
(in thousands)
Permits	$	29,713	$	(10,869	)	$	18,844
Customer lists	4,698		(2,170		)	2,528
Covenants not to compete	1,588		(1,546		)	42
Acquired backlog	8,400		—			8,400
Trade name	4,100		—			4,100
Other	871		(734		)	137
Total amortized intangible assets	$	49,370	$	(15,319	)	$	34,051



June 30, 2012
(in thousands)
Permits	$	29,713	$	(9,494	)	$	20,219
Customer lists	2,198		(2,056		)	142
Covenants not to compete	1,588		(1,536		)	52
Other	871		(658		)	213
Total amortized intangible assets	$	34,370	$	(13,744	)	$	20,626

Amortization expense related to these intangible assets for the three and six months ended June 30, 2013 was approximately $2.3 million and $4.5 million, respectively, and approximately $1.0 million and $2.1 million for the three and six months ended June 30, 2012, respectively. Based on the amortized intangible assets balance at June 30, 2013, amortization expense expected to be recorded in the future is as follows: $4.8 million for the remainder of 2013; $2.2 million in 2014; $2.1 million in 2015; $1.8 million in 2016; $1.8 million in 2017; and $16.1 million thereafter.

The change in goodwill and in the gross value of amortized intangible assets during each period is due to the acquisition of Kenny Construction Company (“Kenny”). See Note 17 for further details.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


10.	Restructuring

We recorded net gains on restructuring of $0.5 million and $1.9 million during the six months ended June 30, 2013 and 2012, respectively. During 2013, we may record up to approximately $25.0 million of restructuring charges, primarily related to previously planned consolidation efforts and assets to be held-for-sale as part of our Enterprise Improvement Plan. The ultimate amount and timing of future restructuring charges is subject to market conditions and our ability to negotiate sales of certain assets at prices acceptable to us.


11.	Covenants and Events of Default

Our debt and credit agreements require us to comply with various affirmative, restrictive and financial covenants. Our failure to comply with any of these covenants, or to pay principal, interest or other amounts when due thereunder, would constitute an event of default under the applicable agreements. Under certain circumstances, the occurrence of an event of default under one of our debt or credit agreements (or the acceleration of the maturity of the indebtedness under one of our agreements) may constitute an event of default under one or more of our other debt or credit agreements. Default under our debt and credit agreements could result in (1) us no longer being entitled to borrow under the agreements, (2) termination of the agreements, (3) the requirement that any letters of credit under the agreements be cash collateralized, (4) acceleration of the maturity of outstanding indebtedness under the agreements and/or (5) foreclosure on any collateral securing the obligations under the agreements.

As of June 30, 2013, we were in compliance with the covenants contained in our note purchase agreements governing our senior notes payable, Credit Agreement and debt agreements related to our consolidated real estate entities. We are not aware of any non-compliance by any of our unconsolidated real estate entities with the covenants contained in their debt agreements.


12.	Weighted Average Shares Outstanding

A reconciliation of the weighted average shares outstanding used in calculating basic and diluted net income (loss) per share in the accompanying condensed consolidated statements of operations is as follows:



	Three Months Ended June 30,		Six Months Ended June 30,
(in thousands)	2013	2012	2013	2012
Weighted average shares outstanding:
Weighted average common stock outstanding	38,829	38,664	38,782	38,666
Less: weighted average unvested restricted stock outstanding	—	193	62	298
Total basic weighted average shares outstanding	38,829	38,471	38,720	38,368

Diluted weighted average shares outstanding:
Weighted average common stock outstanding, basic	38,829	38,471	38,720	38,368
Effect of dilutive securities:
Common stock options and restricted stock units¹	940	680	—	—
Total weighted average shares outstanding assuming dilution	39,769	39,151	38,720	38,368

¹Due to the net loss for the six months ended June 30, 2013 and 2012, restricted stock units and common stock options representing approximately 851,000 and 580,000 shares, respectively, have been excluded from the number of shares used in calculating diluted net loss per share for the respective periods, as their inclusion would be antidilutive.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


13.	Earnings Per Share

We calculate earnings per share (“EPS”) under the two-class method by allocating earnings to both common shares and unvested restricted stock which are considered participating securities. However, net losses are not allocated to participating securities for purposes of computing EPS under the two-class method. The following is a reconciliation of net income (loss) attributable to Granite and related weighted average shares of common stock outstanding for purposes of calculating basic and diluted net income (loss) per share using the two-class method (in thousands, except per share amounts):



	Three Months Ended June 30,		Six Months Ended June 30,
(in thousands, except per share amounts)	2013	2012	2013	2012
Basic
Numerator: